If you want to start a technology business in Europe, the first thing that might come to mind is to make a decision about which country to start in. For a long time now The Netherlands has been a popular choice for, young and established, tech companies. Among the leading tech giants that choose The Netherlands for their headquarters or development teams are: Tesla, Uber, Optimizely, Booking.com, Netflix, Atlassian and Nextdoor. There are various reasons for this. Many experts argue that it is because of the extraordinary high percentage of people who are able to speak English. Othere explanations given are: short travel distances, high levels of purchasing power, a high quality of digital and physical infrastructures and the low levels of government bureaucracy. Although all these seem valid, the real reason why The Netherlands is so attractive for Tech Companies is far more simple: Taxes.
Innovative companies operate almost Tax Free in Holland. Thanks to two special tax arrangements companies that perform Research and Development activities within the EU borders are eligible for receiving up to 40% of their expenditures back from the Dutch government (as long as they are incorporated in The Netherlands).
THE WBSO
WET BEVORDERING SPEUR EN ONTWIKKELINGS WERK
Law to stimulate Research and Development
For companies that spend money/time on development of technically new physical products, physical production processes or software. With the WBSO, companies can lower the wage costs for R&D and other R&D costs and expenditures, such as prototypes or research equipment by up to 40%, even if the project fails to yield the desired result. With the WBSO the Dutch government wants to stimulate entrepreneurs to keep innovating. The Government understands that businesses take significant financial risks by investering in Research and Development. The risk is that time is spend on researching and developing possible solutions that in the end turn out to be of no value. The WBSO is introduced to compensate companies for this financial risk. By refunding up to 40% of the Research and Development costs companies are basically risk-free in failing in 40% of their R&D efforts.
THE INNOVATIEBOX
The Innovation Box
'The Innovation Box’ is a corporate income tax incentive was introduced in order to promote innovative technological developments and support investments in new technologies. Through the Innovation Box, a part of the profit earned with R&D projects qualifies for an effective corporate income tax rate of 5% (instead of the usual 20% to 25%). For most large companies the INNOVATIEBOX is financially far more interesting than the WBSO. The INNOVATIEBOX lowers the corporate tax on those profits that are generated by innovation (the result of own Research and Development activities). When applying for the INNOVATIEBOX companies have to negotiate with the Dutch Tax Authorithies about what share of the total corporate profits can be attributed to actual innovation. The WBSO servers as an entrance ticket to the INNOVATIEBOX. As for a successfull WBSO application proves that your project was considered innovative by the Dutch government. Companies either need a registered patent or an approved WBSO grant in order to be eligible for the INNOVATIEBOX. The latter of these two is far easier and far cheaper to receive. Most companies apply for the INNOVATIEBOX after receiving at least 1 year of WBSO.
WBSO for one-man-businesses
Accessibility for everyone
Why is the WBSO also interesting for self-employed? The WBSO can reduce the amount of income taxes self-employed have to pay. In 2018 that means that one-man businesses can increase their tax-free income with up to € 18.938,-. In total a self-employed entrepreneur can receive a tax free salary of up to € 7.280 (self-employed deduction) + € 2.123 (starter deduction) + € 12.522 (standard WBSO) + € 6.264 (starter WBSO) = € 28.189 Tax Free income per year.
What Innovation qualifies for WBSO?
Innovative for your organization, not for the world.
To qualify for WBSO, your company has to be innovative and perform R&D activities in order to realize innovation. What does the Dutch Government mean with Innovation? This is probably the hardest part to understand for entrepreneurs. A project qualifies for the WBSO when the product/process/software that you are developing contains challenges that are hard for your organisation to solve. Technical innovation requires the presence of a research element in the project, technical uncertainties and/or risks relating to the achievement of the desired result. Your own existing technical abilities and your technical knowledge always serve as the benchmarks. Your WBSO application will need to contain an explicit specification of what your existing technical capabilities and knowledge are and how the technical challenges require you to further then just applying your skills.
Would my business qualify for WBSO?
Check if you can also live Tax Free in The Netherlands.
In order to find out I developed a simple questionnaire . Just answer the questions and see if it is worth moving to/starting in The Netherlands. If you are keen to know more, just follow the link to the contact form at the end of the questionnaire.